Walrasian Foundations for Equilibria in Segmented Markets

19 Pages Posted: 16 Oct 2013

See all articles by Rohit Rahi

Rohit Rahi

London School of Economics - Department of Finance; London School of Economics & Political Science (LSE) - Financial Markets Group

Jean-Pierre Zigrand

London School of Economics - Department of Finance, Systemic Risk Centre, and Financial Markets Group

Date Written: October 15, 2013

Abstract

We study an economy with segmented financial markets and strategic arbitrageurs who link these markets. We show that the equilibrium of the arbitraged economy is asymptotically Walrasian in the sense that it converges to the equilibrium of an appropriately defined competitive economy with no arbitrageurs. This characterization serves to clarify the role that arbitrageurs play in integrating markets.

Keywords: Segmented markets, arbitrage, restricted participation

JEL Classification: D52, G10

Suggested Citation

Rahi, Rohit and Zigrand, Jean-Pierre, Walrasian Foundations for Equilibria in Segmented Markets (October 15, 2013). Available at SSRN: https://ssrn.com/abstract=2340685 or http://dx.doi.org/10.2139/ssrn.2340685

Rohit Rahi (Contact Author)

London School of Economics - Department of Finance ( email )

Houghton Street
London, WC2A 2AE
United Kingdom
+44 20 7955 7313 (Phone)
+44 20 7955 7420 (Fax)

HOME PAGE: http://vishnu.lse.ac.uk/

London School of Economics & Political Science (LSE) - Financial Markets Group ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Jean-Pierre Zigrand

London School of Economics - Department of Finance, Systemic Risk Centre, and Financial Markets Group ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 6201 (Phone)
+44 20 7955 7420 (Fax)

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